Position Sizing: Marrying The Best of Qualitative & Quantitative Decision-Making
At Ensemble Capital, we believe that company analysis is a qualitative activity. The identification of competitively advantaged businesses, with excellent management teams, and long term growth paths is fundamentally a qualitative process. But we also believe that humans are generally terrible at deciding exactly when to buy or sell a stock and specifically how much to own.
To counter act the cognitive biases that lead human traders astray, we developed a quantitative position sizing framework that transforms our qualitative assessments into specific quantitatively derived position sizes. We believe that this approach, assigning humans the qualitative analysis at which they thrive, while assigning quantitative trading decisions to an algorithm, is a direction that many equity managers will pursue in the years ahead.
In 2019, we published a series of blog posts on our position sizing philosophy. Today we’re publishing an illustrated report focused on the details of our process.
You can download the report by clicking here.
While we do not accept public comments on this blog for compliance reasons, we encourage readers to contact us with their thoughts.
Past performance is no guarantee of future results. All investments in securities carry risks, including the risk of losing one’s entire investment. The opinions expressed within this blog post are as of the date of publication and are provided for informational purposes only. Content will not be updated after publication and should not be considered current after the publication date. All opinions are subject to change without notice and due to changes in the market or economic conditions may not necessarily come to pass. Nothing contained herein should be construed as a comprehensive statement of the matters discussed, considered investment, financial, legal, or tax advice, or a recommendation to buy or sell any securities, and no investment decision should be made based solely on any information provided herein. Links to third party content are included for convenience only, we do not endorse, sponsor, or recommend any of the third parties or their websites and do not guarantee the adequacy of information contained within their websites. Please follow the link above for additional disclosure information.